Ms Carmel Motherway:

Heaven forfend that anyone would impose the ne plus ultra on credit unions for the sake of it. Alex Laidlaw is a credit union guru and I will paraphrase his advice. He advised credit unions not to grow for the sake of growing either; to keep it realistic to the needs and wants of the members in the bond. I will list the very simple ways this problem can be addressed. One way is to remind the credit unions, in a gentle but persuasive manner, that only part of their job is to make funds available for access to credit. I refer to section 6, subsections (a) to (g) of the Credit Union Act 1997, which lists the objectives of credit unions and refers to their remit to educate people about the wise use of credit. The big aspect in the commission's report and the heads of the Bill which we tend not to talk about too much is the promotion of thrift. I know this is deeply unfashionable and untrendy but I am unapologetic. We cannot make people better off or more financially independent or autonomous by lending them money. This can actually become more dependent if we continue to lend them money. The only way to make people better off is by increasing their store of wealth and their autonomy, by them having savings. That is the other half of the job. It is not a question that we are worried about cutting the big savers out of the picture; we are quite happy to keep the big savers, Chairman, but what we would like to do is to give credit unions sufficient operational flexibility to allow them to create and craft products that incentivise savings.

I am conscious of time but I will give an example. Many people are bringing their debt problems to the credit unions. They want to get better value from the credit union than they currently get from other lenders. Those loans are seen as quite risky and they necessarily need to be approached with a degree of caution. We could craft a product that allows us to charge, for example, the 12% allowed by law - the normal percentage for that credit union rate of charge might be 9%, these are all nominal figures, not APRs, to keep it simple. If we decide this is a debt loan which is riskier - it is a debt consolidation - we will recognise that fact and we will price in the risk, something the Central Bank has been encouraging us to do for a long time. We will charge 12%. If that loan is repaid correctly over the full period the difference between the 12% we have charged and the 9% we would have liked to charge, will be owned by the member by way of savings. Instead of giving it as a loan interest rebate at the end of the year, it is given as a lump sum - complete with any accrued interest or dividend that would have happened in the meantime - to the member for his or her own use. By the same token, if the member has not repaid the loan in the correct manner and there is a problem of arrears or delinquency of some sort, then the credit union retains those funds and writes them off against the outstanding principal on the loan. That is a simple solution and not difficult from an operational perspective but that would need to be enabled in law.